COMPLIMENTARY
PRINT SUB

CLICK HERE

The-Produce-News-Logo-130

CURRENT ISSUE

view current print edition

PAST ISSUES

archives

 

 

 

 

Adams Produce lays off workers, files for bankruptcy

On Friday, April 27, Adams Produce Co. LLC, headquartered in Birmingham, AL, filed for Chapter 11 bankruptcy protection and has subsequently shut down all of its nine locations in five states, and laid off 400 workers.

According to its bankruptcy petition, the top 20 produce creditors are owed more than $10 million, led by one major supplier that is listed as being owed just shy of $5 million. Most of the top 20 produce creditors are in the $100,000 to $200,000 category. Total debt, including bank loans, has been estimated near $20 million. Speculation is that produce companies with PACA Trust protection will receive a substantial portion of debt repaid, if not all of it.

Adams Produce has been in a financial jam for several months and has been working with financial advisers to sort out its situation. It voluntarily filed for a Chapter 11 liquidation as opposed to a Chapter 11 reorganization or a Chapter 7 liquidation for financial reasons. Attorney Lewis Janowski of Rynn & Janowski in Newport Beach, CA, who is one of the attorneys representing produce industry creditors, said that in a meeting of creditors, Adams’ representatives indicated that it would be less costly to take this route. He said the firm’s representatives, including the debtors attorney and financial advisers, have indicated that the receivables list is robust and as much as $5 million could come in within 14 days.

In addition, it is known that Adams Produce’s bank has swept the firm’s account of well over $1 million in recent days and as much as multi-millions of dollars in recent weeks. In fact, Mr. Janowski said that fact was cited by Adams as the reason it had to file bankruptcy. The lack of working capital prevented the firm from continuing to make payments to its creditors.

According to PACA Trust law, produce creditors that have preserved their Trust status through their regular transactions with Adams, will be in a priority position when Adams Produce assets are liquidated and distributed. Mr. Janowski said that if the optimistic assessment by the produce distributors representatives is accurate, produce creditors will receive substantial payments. “And if there is a shortfall, you would expect that further payments could be pursued against the bank that swept those funds,” he said.

It is being widely reported in the consumer press that Adams employees have not been paid in full for as much as three weeks and could be owed close to $1 million in back pay and benefits. Mr. Janowski said the creditors, in a hearing with the bankruptcy judge, did agree to release funds for the payments of medical benefits for the employees, but did not agree as a group to pay back wages. In fact, he said his clients will not agree to that position. Under PACA Trust law, a bankrupt firm’s employees do not have priority status over produce creditors. “It is our position that all our clients did was ship produce to Adams that they have not been paid for. They also have employees who must be paid,” Mr. Janowski said, indicating that there is no reason that Adams employees should move into a priority position.

This bankruptcy proceeding does have some issues complicating the situation including an equity firm that has financial involvement in the now defunct operation.